Macau casinos bet on cost cuts, visa talks after revenues slump

Casino operators' attempts to soften the blow of Macau's slowdown are starting to show results and optimists are hoping the worst may now be history.

While no one expects the industry to return to the 50 to 60 per cent growth rates it experienced a year ago at the height of the boom, analysts are starting to wonder whether the market's free fall finally found a bottom in the fourth quarter.

Casino revenue declined for a third quarter in the three months to December and fell 2.5 per cent from a year earlier for its first annual contraction in at least three years.

But operators were quick to respond by slashing costs, including pay cuts for at least 12,400 staff or 27 per cent of the 45,621 people officially employed in Macau's gaming industry, and at the same time preliminary indications for casino revenue in January and February have been positive.

Now, halfway through the results reporting season, a clearer picture is emerging of who is best positioned to ride out the city's losing streak.

The nature of Macau's downturn is lopsided, with casino operators more heavily reliant on VIP gamblers seeing the steepest slowdown in business volumes. The credit crunch has seen Macau's ubiquitous junket agents pull back on issuing credit to high rollers for fear of spiralling bad-debt loads.

As a result, VIP casino revenue, which accounted for 67.8 per cent of the market last year, fell 7.52 per cent from a year ago to 15.61 billion patacas in the fourth quarter. That compares with positive growth of 8.2 per cent in the more profitable mass market during the same period.